Oil has hit the headlines today after the most recent Crude Oil Inventory figures showed a surplus yet again of 1.50M barrels (3.08M exp), but more important expectations have changed in the US that there will be further use of oil resources as the winter so far has been quite mild. Generally the winter months put pressure on oil supplies but in this case it has been quite the opposite of what was originally forecast. OPEC itself is trying to cut rapidly in order to stem this supply issue, but continues to be 415,000 barrels above the target set out in November, however the group as a whole is 70% on the way to finally removing excess supply from the market and bringing about demand in the market. Something that many oil suppliers will be happy about after years of build up reserves globally.
What is key here also is the charts and the current technical’s around oil. It’s well documented that a number of leading hedge funds are holding a large amount of bullish contracts at this present time as they expect OPEC to follow through. As such the current bullish trend line in the market is holding firm and is likely to do so, even as the current bearish candle pushes down towards it. However, even to break through this would mean pushing through the 50 day moving average barrier and support at 52.32 which could be a hard ask. If the bulls are to retake control and assert themselves then expect a push back up to resistance at 54.36, while also keeping a close eye on the consolidation that is occurring in this wedge pattern – potential break outs are always on the cards in these situations.
While the USD has been gaining strength some of the commodity currencies are running out of steam. There were big falls yesterday for the AUD, but the NZDUSD has one that has continued to show a bearish trend in recent days and is likely to find itself under further pressure, despite the positive economic news appearing in the market. While global risk sentiment is rising and that has been seen in the equity markets; some countries like NZ have been hammered by traders looking to unwind positions to chase return elsewhere.
When looking for trading opportunities from a technical perspective the NZDUSD usually plays off it’s moving averages quite regularly. The recent 20 day moving average has pushed back bullish plays on the chart, and I would expect it to do the same thing again. Support levels can be found at 0.7030 and 0.6948, but the hardest part is always pushing through the psychological level of 70 cents for the NZD which has traditionally not liked to swing much between the zones if it can avoid it. Any further movements lower could touch the 0.6847 mark, but it will take some time to get close I feel.